Interesting stat: Approximately 15-20% of advisers have not managed money in a rising interest rate environment.

Bill Gross:

Believes we have fake markets. As bonds yield move higher, how long can a fake market be sustained.

Low interest rates

Fed backing

QE

Creates distorted capitalism

Treasuries are artificially compressed, but no different than any other asset class.

Believes markets are continuing to dance, but believes that investors should look to dance more slowly and watch out for potential problems. Raise cash, but that means lower potential returns. Boring is the new sexy.

Duration within unconstrained bond fund is very short, but lower quality BB or BBB.

Believes sovereign credit markets are very tight and doesn’t see any opportunities in the foreign bond market. However, sees some selective Emerging Market debt opportunities.

Myron Scholes:

Option markets have tremendous amount of information on risk. (If that’s the case, there really isn’t any risk in the marketplace)

Upside to downside risks are somewhat neutral across most markets other than China and UK. China and UK seem to have greater upside to downside.

Russell 2k has greater upside to downside.

Once again, Monetary Policy is the main driver.

Risk management is not only mitigating the downside, but participating in the upside.

Believes the Fed is behind the times (Philips Curve, Taylor Model). Stuck in academia rather than seeing what is actually going on in the markets. Cramer is famous for saying “They know nothing”. In 2006-2008 they didn’t understand how credit was flowing and were only focusing on M1, M2, and M3. Believes they know a little more, but common sense has not been their forte.

Alex Crooke:

Seeing lots of opportunities in European equities. Mostly due to the fact that valuations are a much better value then that of the U.S.

U.S. QE ended, but Euro area is still pushing stimulus, bond buying.

Draghi is looking for more inflation, but believes we have at least another 6 months of the taps remaining open.
Equities value are two parts – what they have now, and what they will have in the future.

Is beginning to see some opportunities in the Energy sector.

Rising dividends is the main thesis.

George Maris:

U.S. is starting to accelerate. Inflation is starting to come back.

Sees a U.S. Bifracated market with pockets of extremely expensive and pockets of very cheap.

Homebuilders are cheap. Not enough housing and only trading at about 10x earnings.

Banks are cheap as they are trading at or below book value. Looking at still single digit price valuations.

Tech extremely expensive.

1/3 of people in the U.S. are 18-35 largest population set in a long time. Investors should be watching this group and their trends.

We are all still stuck in a financial crisis mode. This is the most hesitant bull market that we have had. It’s ok to be sanguine as everyone has been nervous since 2008.

Vix is an average. Still seeing idiosyncratic risks within individual securities, but not as a whole. Believes that ETFs are also providing a ballast as more money moves into passive investing.

1994 – 1995 is a good template for what we should be looking at going forward.

Believes velocity of money will increase with rising rates:
o Inflation will spur spending
o Higher rates will give pensioners the confidence that they are getting interest in their savings accounts and will spend.
o Velocity has been extremely low as people have been hoarding cash rather than spending.

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